AC NIELSEN CORPORATION,MUMBAI vs. DDIT (IT) 1(1), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद� राजे� के अनुसार PER RAJENDRA, AM- Challenging the orders,dated 30.9.2009 and 27.2.2014 of the CIT(A)-10,Mumbai,the assessee has filed appeals for the above mentioned three years.Since the issue raised by the assessee are identical in nature,we are adjudicating them by a common order for the sake of convenience.

1203-04/14;5234/14-ACNielsen entered into a General Service Agreement (GSA) in the year 2003 with both the Indian entities cited above. The nature of services to be provided are described as under in the agreement:- “Group Services and Regional Group Services, as they may be amended from time to time , include but are not limited to : a. Development and determination of short and long term business strategies; b. Overall management and coordination in relation to general policies and strategies per country and per division ; c. maintenances of external relationships, to the extent that these services do not comprise Shareholder services; d. Human resources services regarding group policies; e. Legal services; f. Insurance services; g. development, control and maintenance of management information systems; h. administrative support to group companies, including analysis of management information; i. development short and long term IT policies and strategies; j. management and co-ordination of IT policies between group companies; k. tax services; l. financial risk management services, to the extent these services do not comprise Financing Services. m. support in the area of international staffing, career development and international job rotation and n. market research, target research and competitor research “ For providing the services enumerated above, the assessee herein is compensated by the Indian entities cited above. According to the assessee, it received amounts from the above said Indian entities at the rates computed at Cost plus 10% mark up. According to GSA agreement, there will not be any mark up in respect of third party expenses. Thus, the mark up of 10% is charged in respect of costs incurred by the assessee company only.” 3.For all the three years the assessee claimed that the amount received by it from the Indian entities was not taxable.However,the AO did not agree with the contention of the assessee and held that impugned receipts were taxable as royalty within the meaning of section 9(1) (vi)of the Act as well as Article-12of the Indo-US DTAA.In the appellate proceedings the FAA held that consideration received by the assessee in all the three years was in nature of royalty as well as fee for included service. The Tribunal decided the issue as under :- “6. We have heard the rival contentions and perused the record. From the arguments advanced by both the parties, we notice that there is no dispute between the parties with regard to the fact that the question taxability of the consideration received by the assessee needs to be examined in terms of DTAA entered between India and USA. However, from the discussions made supra, it may be noticed that the assessing officer has proceeded to examine the taxability of the impugned consideration by referring to the provisions of sec. 9(1)(vi) of the Income tax Act, Copyright Act and certain decisions rendered in some other context. In fact, the AO took the view that the entire consideration is taxable as “Royalty” in AY 2004- 05, but changed his view in the subsequent two years. In respect of the assessment year 2004- 05 also, the assessing officer has furnished a remand report before the Ld CIT(A), wherein he had suggested that the impugned receipt is required to be treated as both “Royalty” and “Fees for included services”.

1203-04/14;5234/14-ACNielsen